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FEDERAL TRADE COMMISSION

Consumer Fraud in the United States, 2011
The Third FTC Survey

Staff Report of the Bureau of Economics
Federal Trade Commission
April 2013

Consumer Fraud in the United States, 2011:
The Third FTC Survey

Staff Report of the Bureau of Economics
Federal Trade Commission

Keith B. Anderson
April 2013

Federal Trade Commission
EDITH RAMIREZ

Chairwoman

JULIE BRILL

Commissioner

MAUREEN K. OHLHAUSEN

Commissioner

JOSHUA D. WRIGHT

Commissioner

HOWARD A. SHELANSKI

Director

PAULINE M. IPPOLITO

Deputy Director for R&D and Operations

PAUL A. PAUTLER

Deputy Director for Consumer Protection

KENNETH HEYER

Deputy Director for Antitrust

LEEMORE S. DAFNY

Deputy Director for Antitrust and Healthcare

TIMOTHY A. DEYAK

Associate Director for Competition Analysis

JANIS K. PAPPALARDO

Assistant Director for Consumer Protection

H. GABRIEL DAGEN

Assistant Director for Accounting and
Financial Analysis

DAVID SCHMIDT

Assistant Director for Applied Research & Outreach

LOUIS SILVIA, JR.

Assistant Director for Antitrust

MICHAEL G. VITA

Assistant Director for Antitrust

This is a staff report of the Bureau of Economics of the Federal Trade Commission. The views
expressed in this report are those of the staff and do not necessarily represent the views of the
Federal Trade Commission or any individual Commissioner.

Acknowledgments
Pauline Ippolito and Paul Pautler of the Bureau of Economics, Lois Greisman, Bridget Small,
and Evan Zullow of the Bureau of Consumer Protection, and Steve Baker of the Midwest
Regional Office all provided useful assistance in developing the revised survey instrument and
in reviewing drafts of the report. Assistance in developing the survey was also provided by Tim
Amsbary of Synovate, who also directed the administration of the survey. Assistance was also
provided by Dan Hanks of the Bureau of Consumer Protection and Joannie Wei of the Midwest
Regional Office. Able research assistance was provided by Ania Jaroszewicz, Jack Mountjoy,
and Eric Shaeffer of the Bureau of Economics. Jessica Skretch in the Division of Consumer and
Business Education in the Bureau of Consumer Protection handled the final formatting of the
report.

Table of Contents
Executive Summary: Findings from the 2011 Consumer Fraud Survey........................................i
Top Frauds Among Surveyed Frauds ........................................................................................ i
Changes in the Prevalence of Certain Surveyed Categories of Fraud
since 2005............................................................................................................................... iii
How Were the Surveyed Frauds Promoted? .......................................................................... iii
How Were Fraudulent Products Purchased?........................................................................... iii
Characteristics of Fraud Victims.............................................................................................. iii
1.

Introduction......................................................................................................................1

2.

Survey Description.............................................................................................................3

3.

4.

5.

2.1

Survey Design................................................................................................................ 3

2.2

Specific Frauds Included in the Survey.......................................................................... 4

2.3

More General Types of Fraud Included in the Survey................................................. 15

Prevalence of Surveyed Categories of Fraud.....................................................................17
3.1

Overall Rates of Victimization and Number of Incidents............................................. 17

3.2

Specific Surveyed Frauds............................................................................................. 17

3.3

More General Surveyed Frauds................................................................................... 26

3.4

Incidents of Fraud by Product...................................................................................... 27

3.5

Changes in the Prevalence of Certain Surveyed Categories of Fraud since 2005........ 27

Characteristics of Transactions Involving Surveyed Frauds................................................33
4.1

How Were Fraudulent Goods and Services Purchased?.............................................. 33

4.2

How Were Fraudulent Goods and Services Promoted to Victims?............................. 33

4.3

How Much Did Consumers Pay for Fraudulent Offerings?.......................................... 39

4.4

Method of Payment for Fraudulent Offerings............................................................. 42

Basic Demographic Characteristics of Victims of Surveyed Frauds....................................47
5.1

Race and Ethnicity....................................................................................................... 47

5.2

Age .............................................................................................................................. 56

5.3

Education .................................................................................................................... 59

5.4

Other Demographic Characteristics............................................................................. 59

6.

7.

Other Individual Characteristics of Victims.......................................................................63
6.1

General Willingness to Take Risks................................................................................ 63

6.2

Risky Purchasing Practices........................................................................................... 66

6.3

Serious Negative Life Event......................................................................................... 70

6.4

Comfort with Current Level of Debt............................................................................ 70

6.5

Patience....................................................................................................................... 73

6.6

Numeric Skills.............................................................................................................. 78

6.7

Self-Control.................................................................................................................. 81

6.8

Expected Future Income.............................................................................................. 81

Multivariate Analysis of Victim Characteristics ................................................................87
7.1

General Willingness to Take Risks................................................................................ 93

7.2

Risky Purchasing Practices........................................................................................... 94

7.3

Patience....................................................................................................................... 94

7.4

Serious Negative Life Event......................................................................................... 95

7.5

Self-Control.................................................................................................................. 95

7.6

Comfort with Current Level of Debt............................................................................ 96

7.7

Numeric Skills.............................................................................................................. 96

7.8

Expected Future Income.............................................................................................. 97

7.9

Age............................................................................................................................... 97

7.10 Race and Ethnicity....................................................................................................... 98
7.11 Education..................................................................................................................... 99
7.12 Other Characteristics................................................................................................... 99
8.

Conclusion.....................................................................................................................101

Appendix A. Distribution of Responses on
Key Variables................................................................................................. A-1
Appendix B. Methodological Report.................................................................................. B-1
Appendix C.

Analysis of Those Who Refused to Participate and Those Who Did Not
Complete the Survey.......................................................................................C-1

Appendix D. Survey Questionnaire..................................................................................... D-1

List of Tables
Table 1. Types of Fraud Included in the 2011 FTC Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 2. Estimated Number of Adults Who Were Victims of Fraud, 2011. . . . . . . . . . . . . . . . . . . . 18
Table 3. Estimated Number of Incidents of Fraud, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Table 4. Estimated Number of Incidents of Fraud by Product or Service Involved, 2011 . . . . . . . 28
Table 5. Prevalence of Fraud Victimization in 2011 and 2005 Surveys, Frauds Included in
Both Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Table 6. How Fraudulent Goods and Services Were Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Table 7. How Victims First Learned About Fraudulent Offers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Table 8. Amount Paid per Incident of Fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Table 9. How Victims Made Payment in Fraudulent Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . .44
Table 10. Fraud Victimization Rates, 2011, Demographic Characteristics . . . . . . . . . . . . . . . . . . . . 49
Table 11. Fraud Victimization Rates, 2011, Selected Racial and Ethnic Groups. . . . . . . . . . . . . . . . 52
Table 12. Groupings of Frauds Used in Analyzing Characteristics of Victims. . . . . . . . . . . . . . . . . . 53
Table 13. Fraud Victimization Rates, 2011, By Age. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Table 14. Fraud Victimization Rates, 2011, By Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Table 15. Fraud Victimization Rates, 2011, By General Willingness to Take Risks. . . . . . . . . . . . . . 65
Table 16. Fraud Victimization Rates, 2011, By Risky Purchasing Practices. . . . . . . . . . . . . . . . . . . . 69
Table 17. Fraud Victimization Rates, 2011, By Serious Negative Life Event in Last Two Years . . . . 72
Table 18. Fraud Victimization Rates, 2011, By Comfort with Current Debt. . . . . . . . . . . . . . . . . . . 75
Table 19. Fraud Victimization Rates, 2011, By Patience. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Table 20. Fraud Victimization Rates, 2011, By Numeric Skills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Table 21. Fraud Victimization Rates, 2011, By Self-Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Table 22. Fraud Victimization Rates, 2011, By Expected Future Income . . . . . . . . . . . . . . . . . . . . . 85
Table 23. Fraud Victimization Rates, 2011, Multivariate Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Table A-1. Distribution of Values for Key Variables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Table C-1. Analysis of Those Who Refused to Participate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-3
Table C-2. Prevalence of Fraud Victimization, By Difficulty of Reaching Respondents . . . . . . . . . . C-5
Table D-1. Questions in the 2011 FTC Fraud Survey Used to
Define Each Type of Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1

List of Figures
Figure 1. Specific Surveyed Frauds, by Number of Victims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Figure 2. Specific Surveyed Frauds, by Number of Incidents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Figure 3. Fraud Prevalence, Unchanged Frauds, Aggregate Figures, 2005 and 2011 . . . . . . . . . . . 29
Figure 4. Prevalence of Specific Unchanged Frauds, 2005 and 2011. . . . . . . . . . . . . . . . . . . . . . . . 30
Figure 5. How Fraudulent Goods and Services Were Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Figure 6. How Fraudulent Items Were Purchased, 2005 and 2011. . . . . . . . . . . . . . . . . . . . . . . . . . 36
Figure 7. How Fraudulent Offers Were Promoted to Victims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Figure 8. How Fraudulent Offers Were Promoted, 2005 and 2011. . . . . . . . . . . . . . . . . . . . . . . . . . 40
Figure 9. How Victims Made Payment in Fraudulent Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . 43
Figure 10. How Victims Made Payment in Fraudulent Transactions, 2005 and 2011. . . . . . . . . . . 45
Figure 11. Aggregate Likelihood of Being a Victim of Fraud, by Race and Ethnicity . . . . . . . . . . . . 48
Figure 12. Victimization Rates, by Race and Ethnicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Figure 13. Victimization Rates, by Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Figure 14. Victimization Rates, by Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Figure 15. Victimization Rates, by General Willingness to Take Risks. . . . . . . . . . . . . . . . . . . . . . . . 64
Figure 16. Victimization Rates, by Risky Purchasing Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Figure 17. Victimization Rates, by Serious Negative Life Event. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Figure 18. Victimization Rates, by Debt Level. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Figure 19. Victimization Rates, by Patience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Figure 20. Victimization Rates, by Numeric Skills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Figure 21. Victimization Rates, by Self-Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Figure 22. Victimization Rates, by Expected Future Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Executive Summary

Executive Summary: Findings from the 2011
Consumer Fraud Survey
•• This report discusses the findings of the third survey commissioned by the Federal Trade
Commission to examine consumer experiences involving fraud. This survey, which was
conducted in late 2011 and early 2012, provides insights into the prevalence of certain types of
consumer fraud in 2011 and how the incidence of such frauds has changed since the last survey
in 2005. It also provides information about the mechanisms through which such transactions
occur. Finally, to improve understanding of why certain people are more likely to be victimized
by fraudulent offers and to improve consumer education efforts, the survey also explores the
relationship between certain consumer characteristics, including demographics, and the likelihood
of having been a victim of the surveyed frauds.
•• As in the two earlier FTC fraud surveys, consumers were asked questions designed to learn
whether they had been victims of certain types of fraudulent transactions (See Table 1), rather
than being asked more generally whether the consumer had been a victim of a consumer fraud. In
selecting the frauds to include in the survey, an attempt was made to be as consistent as possible
with the previous surveys – in order to obtain information about trends in these areas – and
to include those frauds that have generated the most fraud complaints in the FTC’s Consumer
Sentinel complaint system or been the subject of concerted FTC enforcement activity in recent
years. Most of the frauds covered by the survey were also included in the 2005 FTC survey.
However, two new areas – mortgage relief fraud and grant fraud – were added to the 2011
survey. 1
•• During 2011, an estimated 10.8 percent of U.S. adults – 25.6 million people – were victims of one
or more of the frauds included in the 2011 FTC Consumer Fraud Survey (Table 2). There were an
estimated total of 37.8 million incidents of these frauds during 2011 (Table 3).2

Top Frauds Among Surveyed Frauds
•• The specific types of fraud most frequently reported by survey participants included fraudulent
weight-loss products, fraudulent prize promotions, being billed for a buyers’ club membership
that one had not agreed to purchase, being billed for Internet services that one had not agreed to
purchase, and fraudulent work-at-home programs.

Fraudulent Weight-Loss Products
•• More consumers were victims of fraudulent weight-loss products than of any of the other frauds
covered by the 2011 survey. An estimated 2.1 percent of consumers – 5.1 million U.S. adults –
purchased and used such fraudulent weight-loss products during 2011 (Table 2 and Figure 1).
There were an estimated 7.6 million incidents of weight-loss fraud during the year (Table 3 and
Figure 2).

1

The 2011 survey consisted of interviews with 3,638 U.S. adults at least 18 years of age. Interviews were conducted via telephone –
both cell and landline – and in both English and Spanish.

2

The number of incidents of fraud is greater than the number of victims, because some consumers were victims of more than one of the
frauds covered by the survey and because some consumers experienced a particular type of fraud more than once during 2011.

i

Consumer Fraud in the United States

•• For purposes of this report, weight-loss products are considered to be fraudulent if they were
promoted as enabling consumers who used the product to easily lose a substantial amount of
weight or to lose the weight without diet or exercise. However, when consumers purchased and
used the product, they lost less than half of the weight they had expected to lose, if they lost any
weight at all. Weight-loss products were considered to include nonprescription drugs, dietary
supplements, skin patches, creams, wraps, or earrings.

Fraudulent Prize Promotions
•• The second most common type of fraud among those covered by the survey was fraudulent prize
promotions. An estimated 2.4 million U.S. adults – 1.0 percent of the population – were victims
of fraudulent prize promotions during 2011 (Table 2 and Figure 1). There were an estimated 2.9
million incidents of prize promotion fraud during 2011 (Table 3 and Figure 2).
•• In this study, a prize promotion was considered to be fraudulent if consumers were told that they
had to make a payment, purchase a product, or attend a sales presentation in order to receive
a prize or other award. However, after making the purchase or payment or attending the sales
presentation, the promised prize was not received or the prize was not what was promised.

Unauthorized Billing for Buyers’ Club Memberships and Internet Services
•• Tied for third place were two types of unauthorized billing fraud, situations in which consumers
received and paid bills for two types of services they had not agreed to purchase.
•• The first of these involved consumers being billed without their permission for memberships in
buyers’ clubs. A buyers’ club is designed to permit consumers to purchase products at a lower
price than is generally available.
•• The second involved consumers being billed by a company with which they had not previously
done business, and with which they had not agreed to do business, for Internet-related services
such as Internet access or website hosting or development.
•• There were an estimated 1.9 million victims – 0.8 percent of the U.S. adult population – of
unauthorized billing for buyers’ clubs memberships and, also, 1.9 million victims of unauthorized
billing for Internet services during 2011 (Table 2 and Figure 1).

Fraudulent Work-at-Home Programs
•• Fraudulent work-at-home programs – programs where purchasers paid for a program that was
promoted as enabling consumers to earn money by working at home and where purchasers did not
earn at least half of the amount they were told they would earn – ranked fifth among the specific
frauds included in the survey, with an estimated 1.8 million victims – 0.7 percent of the adult
population (Table 2 and Figure 1).
•• Victims of fraudulent work-at-home programs were more likely to have purchased more than one
such program during the year than were victims of most of the other frauds included in the survey.
As a result, fraudulent work-at-home programs ranked third, behind fraudulent weight-loss
products and fraudulent prize promotions, in terms of the number of incidents during 2011. There
were an estimated 2.8 million incidents of this type of fraud (Table 3 and Figure 2).

ii

Executive Summary

Changes in the Prevalence of Certain Surveyed Categories of Fraud
since 2005
•• For 12 of the 17 frauds included in the 2011 survey, the questions in the survey were essentially
unchanged from the FTC’s 2005 fraud survey.
•• Comparing the percentage of consumers who were victims of these 12 types of fraud in 2011 with
the percentage in 2005 shows that the prevalence of these frauds in 2011 was slightly lower than
in 2005 (9.2 percent versus 10.7 percent, Table 5 and Figure 3).

How Were the Surveyed Frauds Promoted?
•• The Internet was the most common way victims first learned about offers that turned out to be
fraudulent. The Internet was the source of information in almost one-third of instances (Table 7
and Figure 7). The Internet has increased from being the source of information in just over 20
percent to just under 33 percent of incidents (Figure 8).
•• Print media – direct mail solicitations, newspaper or magazine advertisements, and posters or
flyers – were the second-most frequent source of information about offers that turned out to be
fraudulent, accounting for almost 20 percent of incidents (Table 7 and Figure 7). This was a
decline of about 8 percentage points since 2005 (Figure 8).
•• Telemarketing was the source of information in just under 10 percent of incidents, a figure that
was essentially unchanged since the 2005 survey (Table 7, Figures 7 and 8).

How Were Fraudulent Products Purchased?
•• Orders were placed using the Internet in almost 40 percent of fraudulent incidents in 2011 (Table
6 and Figure 5). This was an increase of 20 percentage points since the 2005 survey when roughly
20 percent of frauds were ordered via the Internet (Figure 6).
•• Orders were placed by telephone in another 30 percent of incidents (Table 6 and Figure 5). This
figure was largely unchanged from the results of the 2005 survey (Figure 6).
•• The percentage of orders placed by mail decreased from just over 20 percent to 12 percent, while
the proportion of orders that were placed at the sellers’ place of business fell from around 16
percent to 12 percent (Table 6, Figures 5 and 6).
•• Credit cards were used as the method of payment in over half – 56 percent – of all fraudulent
transactions (Table 9 and Figure 9). In another 15 percent of incidents, consumers paid for a
fraudulent product or service directly from their checking account. These include cases where the
seller obtained the money by using the consumer’s debit card or card number and cases in which
the seller took the money directly from the account after obtaining the account number, as well as
cases where the consumer wrote a check to the seller.

Characteristics of Fraud Victims
•• In addition to examining the prevalence of certain types of fraud in the United States and
the mechanisms through which such fraudulent transactions occurred, the survey also asked
participants about various personal characteristics that may be related to the likelihood of having

iii

Consumer Fraud in the United States

been a victim. The results of this analysis contribute the understanding of why certain people
are more likely than others to be victimized by fraudulent offers. They should also help improve
consumer education efforts.

Risk Takers Were More Likely to Be Victims of Fraud
•• The relationship between risk taking and the likelihood of having been victimized by a fraudulent
offering was examined using two measures of consumers’ willingness to take risks. The more
general measure was based on survey participants’ self-reported willingness to take risks, while
the other looked at whether consumers had engaged in Risky Purchasing Practices. Using either
measure, those who were more willing to take risks were found to be at greater risk of being
victimized.3
•• Looking at the more general measure, those who reported a high general willingness to take
risks were more than twice as likely to have been victimized as were those who reported a low
willingness. Among those who had a high willingness, the prevalence of victimization was 15.8
percent, compared to 7.5 percent of those with a low willingness (Table 15 and Figure 15).
• Those who reported a high willingness to take risks were over six times as likely to have
been victims of Income-Related Fraud as those whose willingness was low. They were also
three times as likely to have been victims of fraudulent prize promotions.
•• The second measure – “Risky Purchasing Practices” – looked at consumers’ willingness to
take risks in terms of the settings in which they were willing to make purchases. Some types of
purchases may be riskier than others because consumers have more limited information about the
seller and the product.
• To serve as a proxy for the willingness to take risks in this context, a consumer was
considered to have engaged in Risky Purchasing Practices if (i) the consumer purchased a
product or service as a result of a telemarketing call, after seeing a television advertisement
or infomercial, or after receiving an unsolicited commercial (“SPAM”) email, (ii) the
purchase was from a company with whom the consumer had not previously done business,
and (iii) the consumer did not make the purchase at a store or the seller’s place of business,
but rather purchased the item via the Internet or by telephone.
•• Almost one-quarter of those who engaged in Risky Purchasing Practices as defined were victims
of one or more of the included frauds (Table 16 and Figure 16). This is almost three times the rate
of those who did not meet the definition (24.8 percent v. 8.5 percent). The likelihood that those
who engaged in Risky Purchasing Practices were victims was higher than the likelihood for any
other group of consumers considered in this report.
• Those who met the definition of Risky Purchasing Practices were more than four times as
likely to have been victims of fraudulent weight-loss products. They were almost four times
as likely to have been victims of fraudulent prize promotions.

3

Two different methodologies were used in examining how differences in the various characteristics are correlated with the likelihood
of having experienced various frauds. The first, which forms the basis of the results reported in Chapters 5 and 6, relies on simple
cross-tabulations of the characteristic being considered and whether a person reported being a victim. As such, any effects of other
characteristics on the reported relationship are not considered. The second approach, which is used in Chapter 7, includes all of the
characteristics in a joint multivariate analysis. As such, the results show how a change in a single characteristic is correlated with the
likelihood of having been a victim of fraud after controlling for everything else. Unless otherwise noted, the results reported in this
summary are taken from the cross-tabulation results.

iv

Executive Summary

Those Who Experienced a Serious Negative Life Event Were More Likely to Be Victims
•• Survey participants who had experienced a serious negative life event in the last two years –
events such as a divorce, the death of a family member or close friend, a serious injury or illness
in their family, or the loss of a job – were more than two-and-a-half times as likely to have
experienced fraud as were those who had not suffered such a negative event (Table 17 and Figure
17). Of those who had experienced a serious negative event, 15.8 percent had been a victim of one
or more of the surveyed frauds during 2011. For those who had not experienced a negative life
event, only 6.1 percent had been a victim.
• Those who had experienced a serious negative life event were 3.75 times as likely to have
been a victim of Debt-Related Fraud as were those who had not experienced a negative
event.
• Those who had experienced a serious negative life event were more than three times as likely
to have been a victim of a fraudulent prize promotion.

More Patient Consumers Experienced Less Fraud
•• Victimization rates were lower among those who self-reported themselves as more patient. The
differences across categories, however, were relatively small: 12.1 percent for those with low
patience, 9.7 percent for those with high patience in the simple cross-tabulations (Table 19 and
Figure 19).
•• After controlling for other characteristics, patience was more important and more significant.
In the multivariate analysis, those who reported being highly patient were 7.0 percentage points
less likely to have been a victim of one or more of the frauds in the survey than those with low
patience (Table 23). Those reporting medium patience were 3.8 percentage points less likely to
have been victims than those with low patience.
• Those with low patience were 2.6 percentage points more likely to have purchased and used
a fraudulent weight-loss product and 2.6 percentage points more likely to have been a victim
of Debt-Related Fraud than those who had high patience.

Those with Limited Numeric Skills Were More Likely to Be Victims
•• Those with the lowest numeric skills were at least 50 percent more likely to have been victims
of the frauds covered by the survey than were those with greater numeric skills: 13.5 percent of
those with the lowest numeric skills were victims, compared to 8.4 percent of those whose skills
were rated high and 9.0 percent of those rated highest (Table 20 and Figure 20).
• Those with the lowest numeric skills were particularly susceptible to prize promotion frauds.
While overall 1.0 percent of survey participants were victims of prize promotion frauds, 2.1
percent of those in the lowest scoring group were victims. For those whose skills were rated
as high or highest, the rates were 0.2 percent and 0.8 percent respectively.

Consumers with More Debt than They Could Handle Financially Were More Likely to Be
Victims of Surveyed Frauds
•• In the simple cross-tabulation analysis, those who indicated that they had more personal debt
than they could handle financially were significantly more likely to have been a victim than those
with less debt. Of those who felt that their debt was more than they could handle financially, 18.8
percent were victims. This is almost twice the rate of 9.6 percent for those who felt that they could

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Consumer Fraud in the United States

handle more debt and more than twice the 8.3 percent for those who indicated that they did not
have any personal debt (Table 18 and Figure 18).
•• However, after controlling for other characteristics, the differences across debt levels were smaller
and no longer statistically significant (Table 23).

African Americans Experienced More of the Frauds Covered by the Survey
•• African Americans were almost twice as likely to have experienced one or more of the surveyed
frauds as were non-Hispanic whites (Table 10a and Figure 11). During 2011, 17.3 percent of
African Americans were victims, compared to 9.0 percent for non-Hispanic whites.
• African Americans were more than three times as likely to have been a victim of DebtRelated Fraud (4.4 percent of African Americans were victims of Debt-Related Fraud,
compared to 1.3 percent for non-Hispanic whites, Table 11 and Figure 12).
• African Americans were also 2.75 times as likely to have been a victim of Income-Related
Fraud.
•• After controlling for other characteristics, African Americans were still estimated to be more
likely than non-Hispanic whites to have been victims of fraud. However, the estimated differences
were considerably smaller (3.9 percentage points for having been a victim of any included fraud
compared to 8.3 percentage points in the simple cross-tabulation analysis) and the differences
were not statistically significant (Table 23).

Hispanics Experienced More of the Frauds Covered by the Survey
•• Hispanics were also more likely than non-Hispanic whites to have been victims of the surveyed
frauds. During 2011, 13.4 percent of Hispanics were victims – almost 50 percent higher than the
rate for non-Hispanic whites (Table 10a and Figure 11).
•• Hispanics were more likely to have been a victim of each of the groupings of fraud included in
Table 11 and Figure 12. The differences were greatest for Debt-Related Fraud, where Hispanics
were more than 2.5 times as likely to have been a victim as non-Hispanic whites and fraudulent
weight-loss products where they were almost 60 percent more likely to be victims.
•• The difference between Hispanics and non-Hispanic whites in the likelihood of being a victim
was slightly greater after controlling for the effect of other characteristics. Other things being
equal, Hispanics were 5.4 percentage points more likely to have been a victim of one or more of
the frauds included in the survey during 2011. In contrast, when looking just at race and ethnicity,
the difference was 4.4 percentage points (Table 23 and Table 11).
•• Among the approximately one quarter of Hispanic participants in the survey who were not
comfortable doing business in English, the probability of being a victim was 9.2 percent. For the
quarter of Hispanics who only did business in English, 10.2 percent were victims. On the other
hand, among the half of Hispanic participants who said that they would be comfortable doing
a business transaction in English, but also indicated that they sometimes used Spanish in such
situations, the probability of being a victim was 17.0 percent.
• In addition, in almost all cases where someone who said that they were not comfortable
doing business in English was a victim, they indicated that the fraudulent transaction was
presented to them in Spanish.

vi

Executive Summary

Age and Fraud
•• Those between 55 and 74 had the greatest chance of being victims of fraudulent prize promotions:
2.8 percent of those between 65 and 74 were victims of fraudulent prize promotions as were 1.8
percent of those between 55 and 64 (Table 13 and Figure 13).
•• More generally, consumers age 55 and older were less likely to have been victims than those
between the ages of 45 and 54. The rate of victimization for any fraud included in the survey was
14.3 percent for those between 45 and 54. It was more than one-third lower (9.1 percent) for those
between 55 and 64. The rate for those 65 to 75 (7.3 percent) was just over half the 45 to 54 rate,
and for those 75 and older the rate was 6.5 percent.
•• Consumers under the age of 45 were somewhat less likely to have been victims than those
between 45 and 54. However, they were more likely to have been victims than those ages 55 and
above.

vii

Introduction

1. Introduction
This report discusses the findings of the third survey commissioned by the Federal Trade Commission
to examine consumer experiences involving fraud.4 This survey, which was conducted in late 2011 and
early 2012, provides insights into the prevalence of certain types of consumer fraud in 2011 and how
the incidence of such frauds has changed since the last survey in 2005. It also provides information
about the mechanisms through which such transactions occur. Finally, to improve understanding of why
certain people are more likely to be victimized by fraudulent offers and to improve consumer education
efforts, the survey also explores the relationship between certain consumer characteristics, including
demographics, and the likelihood of having been a victim of the surveyed frauds.
The next chapter briefly discusses the approach used in the survey and the types of frauds included in the
survey. Chapter 3 provides the basic results of the survey. What percentage of consumers were victims?
Which types of fraud were experienced the most often? In Chapter 4, the mechanisms involved in the
transactions that involved fraudulent products or services are explored. How did consumers first learn
about offers that turned out to be fraudulent? How did they place orders for fraudulent items?
Chapters 5, 6, and 7 examine how the likelihood of being a victim of fraud varied with consumer
characteristics. In Chapter 5, the relationship between consumer demographics and the likelihood of
being a victim is explored. Chapter 6 considers the role of certain other individual characteristics –
including the willingness to take risks, whether consumers had experienced a serious negative life event,
whether they felt like they had too much debt, and how they thought their income would change in the
next few years. Finally, Chapter 7 reports the results of an analysis that looks at the impact of all of these
characteristics – both demographic characteristics and the other individual characteristics – at the same
time.

4

The first FTC fraud survey was conducted between May 20 and June 3, 2003. The findings from that survey are reported in
Keith B. Anderson, Consumer Fraud in the United States: An FTC Survey, published in August 2004. Interviews for the second
survey were conducted between November 16 and December 20, 2005, and the results are found in Keith B. Anderson, Consumer
Fraud in the United States: The Second FTC Survey, which was published in October 2007. (These reports can be found at
http://www.ftc.gov/reports/consumerfraud/040805confraudrpt.pdf and http://www.ftc.gov/opa/2007/10/fraud.pdf, respectively.)

1

Consumer Fraud in the United States

2

Survey Description

2. Survey Description
This chapter provides an overview of the 2011 Consumer Fraud Survey commissioned by the Federal
Trade Commission, including the design of the survey and the types of fraud that were included.

2.1 Survey Design
Interviews for the 2011 FTC Consumer Fraud Survey were conducted between November 28, 2011,
and February 5, 2012.5 The survey was conducted by telephone by Synovate, a commercial survey
research firm. Interviews were conducted in both English and Spanish using computer-assisted telephone
interviewing (“CATI”) and random digit dialing. A total of 3,638 interviews were completed with U.S.
adults who were at least 18 years of age.6 Because of the increasing importance of cell phones, both cell
and landline phone numbers were included in the sample. Interviews were conducted with consumers in
all 50 states and the District of Columbia. As is standard practice in such surveys, weights were applied
to the survey data to ensure that the overall results are as representative as possible of the national
population.
As in the two earlier FTC fraud surveys, consumers were asked if they had particular experiences
rather than asking more generally whether the consumer had been a victim of a consumer fraud. A
problem with asking whether the consumer has been the victim of a consumer fraud in an open-ended
manner is that each survey participant is left to define what is, and what is not, a fraud. This will lead to
inconsistencies in the survey responses, a problem that is avoided by asking about specific event patterns
and applying clearly articulated standards to determine whether a particular set of responses is taken to
represent a fraud or not. Inconsistencies are further reduced because the survey questions never use the
term fraud.
As part of the first FTC fraud survey in 2003, participants were asked generally if they felt that they
had been the subject of a consumer fraud and then were also asked about specific experiences. The
analysis of these responses showed that many consumers who reported having experienced one of the
specifically-defined frauds said that they had not experienced a consumer fraud when asked the more
general question. In addition, many of the consumers who said that they had been the subject of a
consumer fraud described something other than the problems included in the specific questions.7

5

Interviewing was suspended for a few days around Christmas and New Years.

6

The sampling procedures were designed to over-sample members of certain minority groups.
A total of 51,192 working telephone numbers were called while conducting the survey. If a call to a particular telephone number did
not result in contact with a consumer – e.g., if no one answered the call – the number was redialed, up to at least seven attempts, in
order to increase the chances of finding a potential participant at that number. The response rate for the survey was 14 percent using
Response Rate 3 as defined by the American Association for Public Opinion Research. (See The American Association for Public
Opinion Research, Standard Definitions: Final Dispositions of Case Codes and Outcome Rates for Surveys, 7th Edition, AAPOR,
2011.)
See “2011 Consumer Fraud Survey Methodology Report,” prepared by Synovate and included as Appendix B for more details on the
procedures used in constructing the sample for this survey.

7

See Anderson (2004), supra n.1, pp. 41-48, for additional details about this analysis.

3

Consumer Fraud in the United States

2.2 Specific Frauds Included in the Survey
The 2011 FTC fraud survey asked questions designed to learn whether consumers had been the
victim of 17 types of fraud. In selecting the frauds to include in the survey, an attempt was made to
be as consistent as possible with the previous surveys – in order to obtain information about trends in
these areas – and to include those frauds that have generated the most fraud complaints in the FTC’s
Consumer Sentinel complaint system or been the subject of concerted FTC enforcement activity in
recent years.8
Most of the frauds covered by the survey were included in the 2005 FTC survey. Two new areas –
mortgage relief fraud and grant fraud – were added to the current survey.9 Fifteen of the frauds in
the survey are specific types of fraud, such as purchasing a weight-loss product that did not perform
as expected or a work-at-home program that did not generate the level of income promised by the
promoter. The other two types of fraud are a bit more general in nature –whether the consumer paid for a
product but never received it and whether the consumer had been billed for a product that he or she had
not agreed to purchase, other than those covered by the specific frauds.
Table 1 identifies each of the frauds included in the 2011 fraud survey, indicates whether it was included
in the 2005 survey, and if so, whether significant changes were made to the questions in the 2011 survey.
The questionnaire used in the 2011 survey is included as Appendix D of this report and Appendix Table
D-1 identifies the particular questions used to identify each fraud.

Fraudulent Weight-Loss Products
For purposes of this research, fraudulent weight-loss products are defined as products such as
nonprescription drugs, dietary supplements, skin patches, creams, wraps, or earrings that were promoted
as making it easy for consumers to lose a substantial amount of weight or allowing them to lose weight
without diet or exercise, but which did not deliver as promised.10 The Federal Trade Commission has
brought numerous cases against sellers of these products.11
In order to learn about consumer purchases of such weight-loss products, the survey asked consumers
whether they had paid anyone for such a product where the seller suggested or implied that using the
product would help the consumer lose a substantial amount of weight (Question 44a). Consumers who
indicated that they had made such a purchase were then asked whether the seller had suggested that
“this product would make it easy to lose weight” and whether the seller had suggested that “by using
this product you could lose weight without exercise and/or without reducing the amount you eat”
(Questions 44c and 44d). Consumers who indicated that they had purchased products for which either
8

The categories included in the first fraud survey commissioned by the Commission were based on a review of the categories in
Consumer Sentinel, the Commission’s consumer complaint database, that were receiving the most complaints. Some additional
categories have been added in each of the subsequent surveys to cover areas in which there was considerable Commission law
enforcement activity.

9

As discussed in Section 3.5 below, the questions covering three of the frauds included in both surveys were revised to, hopefully,
better measure the desired experiences. One fraud that was included in the 2005 survey – Unauthorized Billing for Information
Services – was deleted from the current survey.

10

Exercise equipment would not, therefore, be included in this definition of fraudulent weight-loss products, for instance.

11

See, e.g., FTC v. Leanspa, LLC, No. 11-01715 (D. Conn. filed Nov. 2011); FTC v. Central Coast Nutraceuticals, Inc., No. 10-4931
(N.D. Ill. filed Aug. 2010); FTC v. Romeo, No. 09-1262 (D.N.J. filed Mar. 2009); FTC v. Medlab, Inc., No. 08-0822 (N.D. Cal. filed
Feb. 2008).

4

Survey Description

Table 1. Types of Fraud Included in the 2011 FTC Fraud
Description

Was This
Fraud Included
in the
2005 Survey?a

Weight-Loss Products

Purchased a weight-loss product that was promoted as making it easy to lose
weight or to lose weight without diet or exercise. Only lost a little of the weight
anticipated or lost no weight.

Yes

Prize Promotions

Paid money, made a purchase, or attended a sales presentation to receive a
promised prize or lottery winnings. Did not receive the prize or winnings or the
prize was not as promised.

Yes – Questions
changed in 2011

Unauthorized Billing –
Buyers’ Clubs

Billed for a buyers’ club membership consumer had not agreed to purchase.

Yes

Unauthorized Billing –
Internet Services

Billed for Internet services consumer had not agreed to purchase.

Yes

Work-at-Home Programs

Purchased a work-at-home program. Did not earn at least one-half of the promised
level of earnings.

Yes

Credit Repair

Paid someone who promised to remove negative, but accurate, information from
credit report or promised to provide information on how to establish a new credit
record that would not contain negative information in current credit report.

Yes

Debt Relief

Paid someone who promised to arrange to pay off credit card debts for less than
the amount owed or to arrange a lower interest rate on current credit card debt
and then failed to provide the promised services or obtain the promised results.

Yes – Questions
changed in 2011

Credit Card Insurance

Purchased insurance against the misuse of a lost or stolen credit card.

Yes

Business Opportunities

Purchased a business opportunity. Did not earn at least half as much as promised
or did not receive promised assistance.

Yes

Mortgage Relief

Made an advance payment to someone other than the company that holds or
services the mortgage to obtain a mortgage modification. The modification was
either not received or the terms offered were significantly worse than what had
been promised.

No

Advance Fee Loans

Paid an advance fee to obtain a promised or guaranteed loan or credit card.
Promised credit was not received.

Yes

Pyramid Schemes

Purchased a membership in a pyramid scheme. Did not earn at least half of the
amount the promoter promised would be earned.

Yes

Government Job Offers

Made a payment to someone who falsely represented that the purchaser would
receive a government job.

Yes

Counterfeit Checks

Received a check and sent some of the money back to the sender or to someone
else. Later learned that the check was counterfeit.

No

Grants

Paid someone who promised to obtain a grant either from the government or from
someone else. No grant was received.

No

Fraud

Specific Surveyed Frauds

More General Surveyed Frauds
Paid for Something
Never Received

Paid for a product that was not received.

Yes

Unauthorized Billing –
Other Products

Billed for a product or service consumer had not agreed to purchase, products
other than those identified above.

Yes

Source: 2011 FTC Fraud Survey
Note.
a. In addition to the significant changes to the wording of the questions about prize promotions and debt relief services, the questions
seeking information about payments made were changed for all of the frauds included in the 2011 survey. In addition, minor
wording changes were made to clarify some questions.

5

Consumer Fraud in the United States

of these claims had been made were also asked how much weight they had lost while using the product
relative to the weight they had expected to lose (Question 44e). For purposes of this study, and in order
to provide a conservative estimate of the extent of this type of problem, only those who indicated either
that they lost only a little of the weight they expected to lose or that they did not lose any weight were
counted as victims of weight-loss fraud.12

Fraudulent Prize Promotions
In a fraudulent prize promotion, sellers tell consumers that they have won a prize – or that they have
won one of four or five possible prizes – but that they must buy a product or make some other payment
before they can receive their prize. Even when the seller does not directly tell consumers that they must
make a purchase, consumers may be misled into believing that they are more likely to win the prize if
they make a purchase. Alternatively, consumers may be told that they have to attend a sales presentation
to receive the promised prize. The survey sought to determine the extent to which promised prizes are
not delivered or are not as represented by the promoter.13
In seeking to learn about prize promotion frauds, the survey first asked survey participants whether they
had been told that they had “won a prize or a lottery or had been selected to receive an award such as
money, a free vacation, or other product or service” (Question 39). Those who answered this question in
the affirmative were then asked whether they had been told that they needed to make a purchase, make a
payment, or attend a sales presentation in order to receive the item and whether they had, in fact, made
the purchase or payment or attended the sales presentation (Questions 39a.1 and 39a.2). Those who
had done so were then asked whether they had received the prize, and if so, whether it was essentially
what had been described to them (Questions 39a.4 and 39a.5). Finally, those who had not received the
promised prize or who found the actual item not to be what they had been promised and who had made a
payment or purchase were asked how much money they had actually paid (Questions 39a.7 and 39a.11).
Consumers were only considered to be victims if they had not received the promised prize or the prize
was not what they had been promised, and if they had actually paid money or had attended a sales
presentation.

Unauthorized Billing for Membership in a Buyers’ Club
The survey also examined the practice of billing consumers without their consent for memberships in a
buyers’ club. A buyers’ club is designed to permit consumers to purchase products at a lower price than
is generally available.

12

Consumers who purchased a weight-loss product but did not use it were not considered to be victims of weight-loss fraud for purposes
of this survey. As with a number of the other frauds, calculations were also made using alternative definitions of what amounted to
a fraud. For example, alternative calculations of the number of victims of the sale of fraudulent weight-loss products were made
assuming that those who did not use the product were also victims. A second alternative involved only treating a product as potentially
fraudulent if the seller represented that weight could be lost without diet or exercise, but not if the product was represented as making
it easy to lose weight. The results of these alternative calculations are provided in footnotes to the tables of results.

13

Prize promotions are regulated by a variety state and federal laws. See e.g., Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(2)(iv)-(v).
A prize promotion could be unlawful even if the promised prize is awarded. For the purposes of this survey, however, instances where
a consumer received the prize that was promised are not counted as fraudulent. This is again an effort to ensure that the estimates are
conservative given the limitations of the survey data.
Cases the Commission has brought in this area include FTC v. National Awards Service Advisory, LLC, No. 10-5418 (N.D. Cal. filed
Nov. 2010); FTC v. VGC Corporation of America, No. 11-21757 (S.D. Fla. filed May 2011); FTC v. National Prize Information Group
Corp., No. 06-1305 (D. Nev. filed Oct. 2006).

6

Survey Description

The Commission has taken action against the deceptive marketing of buyers’ clubs.14 In recent years,
for example, sellers have offered a membership in a buyers’ club as an add-on or “upsale item” at the
end of a telemarketing sale. Having completed the sale that ostensibly was the reason for the call, the
telemarketer then offers the consumer a free trial membership in a buyers’ club as a “thank you.”
Sometimes the membership is offered as a negative option, whereby the credit card that the consumer
used to make the initial purchase is automatically charged for the price of the membership unless the
consumer cancels the membership by the end of the free trial period. If the seller does not make the
negative option clear, however, consumers may agree to accept the free trial offer believing that the
membership will not continue beyond the free trial period unless the consumer affirmatively takes steps
to continue the membership.15 Consequently, consumers are charged for the membership without their
authorization.16
Buyers’ clubs were just one of several problems involving unauthorized billing that were covered by
the survey.17 This section of the survey began with a general question about whether, in the last year,
participants had “been billed for a product or service which [they] did not agree to purchase or were
... billed for an amount that was substantially more than [they] expected to pay.”18 Participants who
answered in the affirmative were then asked a series of questions designed to learn more about the
products or services involved. In the case of buyers’ club memberships, the survey asked whether
participants had been billed for “a membership in a club that the seller told [them] would allow [them]
to purchase something for a lower price than is generally available” but that they had not agreed to
purchase (Question 21.1).
When dealing with unauthorized billing, sometimes consumers may be billed for a product they did not
order as a result of an honest mistake by a legitimate business. Such mistakes should not be counted
as frauds. The survey, therefore, asked participants who indicated that they had experienced a billingrelated problem whether they had sought a refund from the seller. When a refund had been sought, the
survey then asked whether the seller provided a refund or other adjustment that the purchaser found

14

See, e.g., FTC v. FTN Promotions, Inc., No. 07-1279 (M.D. Fla. filed July 2007); FTC v. Universal Premium Services, No. 06-849
(C.D. Cal. filed Feb. 14, 2006); FTC v. Wellquest Int’l, No. 03-5002 (C.D. Cal filed July 2003).

15

Indeed, consumers may only be informed about the negative option in introductory membership information that is mailed to them
after they have agreed to accept the free trial membership. This information is often sent by third-class bulk mail and many consumers
do not open the mail because it appears to be unsolicited promotional materials.

16

The Commission addressed this problem in the amendments to its Telemarketing Sales Rule (“TSR”) that became effective March
31, 2003. Under the revised TSR, sellers are prohibited from using a consumer’s credit card account that the seller had previously
obtained to charge for a membership that automatically converts from a free trial unless the consumer repeats at least part of the
account number to the seller and gives his or her express agreement to be billed for the membership. (See 16 CFR 310.4(a)(6)(i).)

17

The Commission has filed a number of cases concerning negative option fraud occurring in contexts other than buyers’ clubs. See,
e.g., FTC v. Johnson, No. 10-2203 (D. Nev. filed Dec. 2010) (concerning “free” trial memberships for government grant and moneymaking programs); FTC v. Wilms, No. 11-00828 (W.D. Wash. filed May 2011), (concerning “free” trial memberships in a variety of
health, cosmetic, and money-making programs).

18

Question 18.1. The question noted that this situation could arise where the consumer had agreed to accept a free trial of the product or
service and had been subsequently billed even though the consumer had not approved the continuation of the service beyond the free
trial period.

7

Consumer Fraud in the United States

acceptable.19 Survey participants who answered in the affirmative were not considered to be victims of a
fraud in most instances, because they did not suffer any monetary harm as a result of the billing error.20

Unauthorized Billing for Internet-Related Services
The survey also examined unauthorized billing involving the provision of Internet-related services by
entities with which the consumer had not previously done business. In particular, the survey inquired
about whether consumers had been billed for services such as Internet access or website hosting or
development (Questions 19.1 and 19a).
This problem is illustrated by a couple of cases brought by the Commission. In INC21.com, the
Commission alleged that defendants were offering services such as website design services, website
hosting, Internet directory listings, search-engine advertising, and Internet-based faxing. The
Commission alleged that in some cases, victims were told that they would receive a free trial period,
but were not told that they would be charged if they did not cancel the service during the free trial
period. In other cases, consumers were charged even after declining to accept defendants’ offer. In still
other instances, the Commission alleged that consumers were charged without ever being contacted by
defendants.21 Similar allegations were made in a case against Websource Media.22

19

Questions 26 and 27. These two questions were asked about any of the unauthorized billing problems.

20

Some consumers who obtained refunds may, in fact, have been defrauded. In some cases, for example, fraudulent operators may
provide refunds to consumers who complain – particularly if the consumer complains to a Better Business Bureau or a legal authority.
In this way, the fraudulent operator can appear responsive to consumer complaints and therefore avoid attracting the attention of
law enforcement, while continuing to profit from consumers who are less aggressive. Moreover, consumers who obtain refunds
nonetheless experience some injury because they must spend time and effort to obtain the refund or other adjustment. The estimates
provided here are, therefore, conservative.
Participants who did not ask for a refund are somewhat harder to categorize. Some who failed to seek a refund probably did fall victim
to fraud and would not have obtained a refund if they had asked for one. Others were likely dealing with legitimate firms and would
have received one – and thus should not be considered victims of fraud. To address this issue, it has been assumed that, had they
asked, the same fraction would have received a refund as is observed for those who did ask.
The decision to treat consumers who received refunds, and those who probably would have received a refund if they had asked, as
not having been defrauded results in a conservative estimate of the number of victims of fraud. It may also initially seem to be at odds
with some of the cases brought by the Commission. However, the analysis used in a study such as this cannot be applied to the FTC’s
fraud cases or vice versa. For example, the FTC has sued a number of companies that operate high-volume, low-dollar fraudulent
credit card billing schemes that charge consumers’ credit card accounts without their authorization. See, e.g., FTC v. J.K. Publications,
Inc., 99 F. Supp. 2d 1176, 1201 (C.D. Cal. 2000). In such cases, the FTC frequently argues that most or even all of the transactions
are fraudulent. After a trial, the court in J.K. Publications found that more than 90 percent of the transactions were demonstrably
fraudulent. Even so, only about 15 percent of the more than $40 million billed to consumers was credited or refunded to victims
before the FTC brought its case. Applying the standard used in this study to the facts in that case would have yielded a result whereby
consumers who received refunds – and even some who did not – would have been excluded from the pool of victims, when in reality
virtually all of the transactions associated with the defendants were fraudulent. Applying the analysis from such cases to this study,
however, would lead to an equally erroneous result. In the context of a randomized telephone study, we have very limited information
about the nature of the businesses with whom the consumers were interacting.

21

FTC v. INC21.com Corp., No. 10-0022 (N.D. Cal. filed Jan. 2010). See also, “FTC Halts Massive Cramming Operation that
Illegally Billed Thousands; Alleges Scam Took in $19 Million over Five Years,” FTC Press Release March 1, 2010, available at
http://www.ftc.gov/opa/2010/03/inc21.shtm. In some cases, defendants would contact consumers and offer a free 15 day trial period.
In other cases, they simply crammed charges on consumers’ telephone bills, either without any contact with the consumer or after a
call in which defendants’ telemarketers represented that they were only verifying an address.

22

FTC v. Websource Media, L.L.C., No. 06-1980 (S.D. Tex. filed June 2006).

8

Survey Description

Fraudulent Work-at-Home Programs
Consumers are often interested in work that they can perform at home. Unfortunately, offers of such
work often promise greater earnings than consumers can actually earn – such as promising large
payments to consumers who agree to stuff envelopes or construct craft items. Such fraudulent offers
often require consumers to make payments to obtain the materials needed to perform the task.23
In seeking to learn more about this type of fraud, survey participants were asked whether they had paid
anyone “who promised to provide you with work that you could do at home,” and if so, whether the
seller had led consumers to believe that they would earn a certain amount of money (Questions 31a.1
and 37a). Where sellers had made earnings representations, purchasers were asked how the money they
made from the work-at-home program compared to what they had been led to expect (Question 37b).
Again, in an attempt to develop conservative estimates of the extent of the problem, only consumers
who had purchased such programs and indicated that they had earned less than half of what they been
led to expect or had not earned any money were considered to be victims of work-at-home fraud.24

Debt Relief
As used in this survey, debt relief fraud can take two forms. Perpetrators may suggest that they can get a
consumer’s creditors to settle outstanding debts for a fraction of the amount owed and then fail to obtain
the promised results. Alternatively, there may be a promise of a reduced interest rate on an existing
credit card. Again, the promised rate reduction is not provided. The Commission has brought numerous
cases alleging these kinds of misrepresentations in recent years.25 In mid-2010, the Commission
amended its Telemarketing Sales Rule to address many of the abuses that were arising in this area.26
In order to learn whether consumers had experienced these types of problems, the survey first asked
whether participants had paid money to anyone who promised to reduce or eliminate their credit card
debts or to get the interest rate or monthly payments on their credit card debts reduced (Questions
16a.1.a, 16a.1.b, and 16a.3). Those who indicated that they had paid someone to get the interest rate on
their credit card reduced were then asked to compare the results obtained with what had been promised

23

FTC cases involving sellers of work-at-home programs include FTC v. Darling Angel Pin Creations, Inc., No. 10-335
(M.D. Fla. filed Feb. 2010); FTC v. Real Wealth Inc., No. 10-0060 (W.D. Mo. filed Jan. 2010); FTC v. Infusion Media,
Inc., No. 09-1112 (D. Nev. filed June 2009); FTC v. Grant Connect, LLC, No. 09-01349 (D. Nev. filed July 2009).

24

Consumers who purchased a work-at-home program where an earnings claim was made but did not work at the program were also
counted as victims. This differs from how consumers who purchased, but did not use, a weight loss product were counted (See note
12, supra). In the FTC’s enforcement experience, some victims of fraudulent work-at-home programs realize that the program will not
work as soon as they receive the program materials. As a result, they do not try to use the program. It seems less likely that consumers
who had purchased a weight-loss product, such as a pill or a dietary supplement, would learn something that would convince them
that the product would not work by visually examining the product. Therefore, those who failed to use a weight-loss product are not
counted as victims.

25

See, e.g., FTC v. Southeast Trust, LLC et al., No. 12-72441 (S.D. Fla. filed Dec. 2012); FTC v. Ryan Golembiewski, et al., No. 12-893
(S.D. Ohio filed Sept. 2012); FTC v. Mallett, No. 11-1664 (D.D.C. filed Sept. 2011); FTC v. Premier Nationwide Corp., No. 12-0009
(D. Ariz. filed Jan. 2012); FTC v. FDN Solutions, LLC, No. 12-820 (C.D. Cal. filed May 2012).

26

See, “FTC Issues Final Rule to Protect Consumers in Credit Card Debt: Amendments to Telemarketing Sales Rule Prohibiting Debt
Relief Companies From Collecting Advance Fees Will Take Effect in October 2010,” FTC Press Release, July 29, 2010, available at
http://www.ftc.gov/opa/2010/07/tsr.shtm (last visited October 19, 2012).

9

Consumer Fraud in the United States

(Question 16a.8). Anyone who said that the reduction was less than half of what had been promised was
treated as a victim.27
Those who said that they had purchased a debt-settlement service were then asked whether they were
still making payments under the plan (Question 16a.4). For purposes of this survey, those who were
still making payments were not considered to be victims.28 Participants who had dropped out of such
a program were then asked whether they had settled their debt on at least one credit card using the
seller’s services (Question 16a.5), and if so, how the amount they paid to settle the debt related to any
representations made by the seller (Questions 16a.6 and 16a.7). In those instances where no debts had
been settled, purchasers of such services were asked if the seller had refunded all monies the person had
paid into the program (Question 16a.5.1). Those who had either not received a refund or whose settled
debts were reduced by less than half of what they had been led to expect were considered to be victims.

Fraudulent Credit Card Insurance
Questions were included in the survey to learn about the extent of fraudulent offers of credit card
insurance promoted as protecting consumers against the misuse of their credit cards in the event the card
is lost or stolen. Federal law limits consumers’ liability for the misuse of their credit cards to $50.00,29
and credit card companies often do not require that consumers pay even this amount. Nevertheless,
some fraudulent operators attempt to defraud consumers by misrepresenting that card holders face
considerable financial risk if their credit cards are misused. These operators then offer to sell consumers
insurance to protect against this purported risk.
To examine this type of offer, participants were asked: “In the past YEAR, have you paid money to
anyone who promised to provide you with credit card insurance?” Those who answered yes were then
asked whether the insurance was to protect against unauthorized use if the card was lost or stolen or to
protect them from falling behind with payments because of a lost job or illness (Questions 15.1 and 15a).
For purposes of this study, participants were considered to be victims if they had purchased insurance
that protected them against unauthorized use.

Credit Repair
Consumers who have trouble obtaining credit because of negative information in their credit records
are sometimes targets of offers claiming that the seller, in exchange for a fee, will help the consumer
improve his or her credit record and thus enable the consumer to obtain credit. The survey asked specific

27

Of those who said that they had paid someone who promised to obtain a reduction in the interest rate on their credit card, 51 percent
said that the rate had been reduced by less than half of what had been promised and an additional 36 percent said that no reduction had
been obtained. Only 8 percent said that the interest rate had been reduced as much as they had expected. (The remaining 5 percent said
that they did not know how the reduction that was obtained compared to what had been promised.)

28

Of course, some consumers who were still making payments for a debt settlement service may have been victimized if the service
ultimately failed to deliver the promised services. There is, however, no way to know whether this was the case based on questions
that were asked before the consumer completed or dropped out of the program. For this reason, as in other cases, the estimates here
are conservative.

29

15 U.S.C. 1643. See also, Federal Trade Commission, “Consumer Information: Credit Card Loss Protection,” available at
http://www.consumer.ftc.gov/articles/0093-credit-card-loss-protection (visited March 26, 2013).

10

Survey Description

questions about two types of so-called “credit repair” schemes, both of which are illegal under the Credit
Repair Organizations Act.30
The first type of scheme involves a false claim that the seller can remove derogatory information
from a credit report – even though it is accurate and even though the credit reporting agency is legally
permitted to include the information in the credit report – and thereby improve the consumer’s ability to
obtain credit. Consumers are generally required to make an up-front payment to obtain these services.
Not surprisingly, little, if any, of the negative information is actually removed after consumers pay the
required fee. To assess the extent of this fraud, survey participants were asked: “In the past YEAR,
have you paid money to anyone who promised to remove negative, but true, information from your
credit record?” Those who answered in the affirmative were then asked whether the negative, but true,
information was removed from their credit report (Questions 13.1 and 13a).31
In the second type of scheme, the seller promises – in exchange for a payment – to tell consumers how
to create a new identity to use in applying for credit. Typically, the seller directs consumers to obtain a
new personal identification number, often an employer identification number (“EIN”), and then to use
this number in applying for credit, rather than ther Social Security numbers. The seller claims that by
using the new identity on credit applications, the consumer can hide derogatory credit report information
from potential lenders. The survey question related to this scheme was: “In the past YEAR, have you
paid money to anyone who promised to help you obtain credit by creating a new credit identity or new
credit record?” (Question 14.1).

Business Opportunity Offerings with False Earnings Claims or False Offers of
Assistance
Business opportunity offerings sometimes involve false promises that purchasers will make a large
amount of money. Similarly, sellers sometimes make false promises that they will provide purchasers
with assistance in finding customers or locations in which to place their equipment. For example, sellers
of fraudulent vending machine business opportunities may promise to provide high-volume locations
where purchasers can place their machines.32
Business opportunity offerings generally include some package of information, equipment, and services
that purportedly will enable the consumer to establish and operate a successful business. Such offerings
often appeal to consumers who have little or no business experience, because they supposedly provide
everything needed to own and operate the business. By promising that the business is certain to make
at least a specific income, a seller can lead potential purchasers to believe that there is little risk in
purchasing the business. Similarly, claims that the seller will provide consumers who purchase their
30

15 U.S.C. 1679. The Commission has brought numerous cases against those offering credit repair services. See, e.g., FTC v. Latrese
& Kevin Enterprises, Inc., No. 08-1001 (M.D. Fla. filed Oct. 2008, contempt proceedings filed June 2012); FTC v. Credit Restoration
Brokers, LLC, No. 10-0030 (M.D. Fla. filed Jan. 2010, contempt proceedings filed Apr. 2011).

31

Although the survey questions only asked about instances where the participant paid money for credit repair services that were not,
in fact, provided, the Credit Repair Organizations Act (“CROA”) makes it illegal for a credit repair organization to charge or pay for
any credit repair services in advance of providing those services in full. (15 U.S.C. 1679c(b)). Accordingly, the survey results are
conservative and may not indicate the full extent of CROA violations.

32

Commission cases against promoters of fraudulent business opportunities have included FTC v. The Online Entrepreneur, Inc., No.
12-2500 (M.D. Fla. filed Nov. 2012); FTC v. Shopper Systems, LLC, et al., No. 12-23919 (S.D. Fla. filed Oct. 2012); FTC v. North
America Marketing & Associates., LLC, No. 12-0914 (D. Ariz. filed May 2012); FTC v. Ivy Capital, Inc., No. 11-00283 (D. Nev. filed
Feb. 2011).

11

Consumer Fraud in the United States

business opportunity offerings with customers or selling locations can convince potential purchasers that
they do not need to do much work to operate this business and that they are highly likely to succeed.
To measure the extent of problems with false earnings claims, survey participants who indicated that
they had purchased a business opportunity were asked whether they had been “led to believe that [they]
would earn a certain amount of income or profit from this business” (Questions 31.1 and 35.1). Those
who answered in the affirmative were then asked how much they made compared to what they had been
led to expect (Questions 35.2). Similarly, participants were asked whether they had been promised “help
in locating customers who would use [their] services or allow [them] to sell [their] products from their
premises,” and if so, whether they had obtained the promised assistance (Questions 36.1 and 36.2).
Victims of this type of fraud are limited to those who said that they had less than half as much as they
had been led to believe they would make, or that they had not received the assistance that had been
promised.33

Mortgage Relief
With the onset of the housing crisis in 2008 and the downturn in the economy, many homeowners found
themselves having trouble paying their mortgages. This provided expanded opportunities for fraudulent
sellers who promised to obtain modifications on consumers’ mortgages or obtain other relief so that
the consumers could avoid foreclosure or lower their monthly payments. The Commission has brought
dozens of law enforcement actions in this area and has also enacted new trade regulation rules governing
sellers who offer mortgage assistance services.34
To learn about consumers’ experiences with this type of problem, the survey first asked participants
whether they had paid someone who promised to obtain a modification of their mortgage so that they
could avoid foreclosure and keep their homes, whether these payments were made to someone other
than their mortgage lender or the company that serviced the loan, and whether payments were required
before the modifications were obtained (Questions 11.1, 11.3, and 11.4). Those who had made payments
to someone other than their lender or the company that serviced the loan and had done so before the
modification was arranged, were asked whether a mortgage modification had actually been arranged
by the person to whom they made these payments (Question 11.5). Where payments were made to a
third party, payments were required before the mortgage modification was obtained, and the promised
mortgage modification was not obtained, the consumer was considered to be a victim of mortgage relief
fraud.35

33

As with Work-at-Home offerings, consumers who purchased a business opportunity offering where an earnings claim was made or
assistance was promised and then failed to operate it are counted as victims.

34

Cases include FTC v. Prime Legal Plans, LLC, et al., No. 12-61872 (S.D. Fla. filed Sept. 2012); FTC v. American Mortgage
Consulting Group, LLC, et al., No. 12-01561 (C.D. Cal. filed Sept. 2012); FTC v. U.S. Mortgage Funding, Inc., No. 11-80155 (S.D.
Fla. filed Feb. 2011); FTC v. Lakhany, No. 12-00337 (C.D. Cal. filed Mar. 2012); FTC v. Residential Relief Foundation, Inc., No.
10-3214 (D. Md. filed Nov. 2010). For information on the Commission’s Mortgage Assistance Relief Services (“MARS”) Rule, see
“FTC’s Mortgage Assistance Relief Services Advance Fee Ban Takes Effect,” FTC Press Release, February 10, 2011, available at
http://www.ftc.gov/opa/2011/02/mars.shtm (last visited October 19, 2012).

35

The questionnaire also asked anyone who said that the person to whom they had made the payments had, in fact,
arranged a modification, how the terms compared to what the consumer had been led to expect. If the terms of the
modified loan were significantly worse than what was expected, the person would also have been counted as a victim.
However, no survey participants gave this pattern of responses.
12

Survey Description

Advance Fee Loans and Credit Cards
The FTC frequently receives complaints about offers for a loan or credit card in return for the payment
of a fee. These offers, which are often directed to consumers with tarnished credit records, require that
the consumer pay the fee before the promised loan or credit card is received. In most instances, however,
consumers who pay the required fee do not receive the promised loan or credit card. 36 Indeed, it is a
violation of the Telemarketing Sales Rule to ask for a payment before delivering a promised credit card
or loan, if the offer is made by telephone.37
To assess the frequency of this problem, the survey asked “In the past YEAR, have you paid money
to anyone who promised or guaranteed to provide you with a credit card or loan, but required you to
pay a fee before receiving the credit card or loan?” (Question 16.1). Participants who answered in the
affirmative were then asked whether they were promised a credit card, a mortgage loan, or some other
kind of loan, and whether they had actually received the promised loan or credit card (Questions 17a and
17). Only those who had been promised something other than a mortgage loan, who said that they were
required to make the payment before the card was received, and who had not received it were considered
to be victims of an advance fee loan fraud.38

Pyramid Schemes
Pyramid scheme promoters often claim that purchasers will operate their own businesses selling a
particular product or service and that they will make money both from their own sales and from the sales
of those they recruit to join the program. Although such a business may look like a legitimate multi-level
marketing program, they differ because the income earned by participants in a pyramid scheme comes
ultimately from recruiting, rather than the sale of products or services to consumers. Most participants
in pyramid schemes lose money, because the program really just transfers money from those who have
joined most recently to those who have been involved for a longer period of time. At any point in time,
the vast majority of those who have joined the program – often 90 percent or more – will not have
recouped the money they paid to join.39
In order to differentiate those who had purchased a pyramid scheme from those who had simply
purchased a business opportunity, the survey asked those who said that they had paid someone for an
opportunity to operate their own business, whether they had been led to believe that most of the money
they would earn would come from recruiting others to join the business, rather than from the sale of
products (Questions 31.1 and 33). Those who indicated that the income was to come from recruitment

36

The FTC has brought numerous law enforcement actions addressing this problem. See, e.g., FTC v. Apogee One Enterprises, LLC,
et al., No. 12-588 (N.D. Ill. filed Jan. 2012); FTC v. Group One Networks, Inc., No. 09-00352 (M.D. Fla. filed Feb. 2009); FTC v.
Integrity Financial Enterprises, LLC, No. 08-914 (M.D. Fla. filed May 2008); FTC v. Financial Advisors & Assocs. Inc., No. 0800907 (M.D. Fla. filed May 2008); FTC v. Assail, Inc., No. W03CA007 (W.D. Tex. filed Jan. 2003).

37

See Telemarketing Sales Rule, 16 C.F.R. § 310.4(a)(4).

38

Mortgage loans were excluded because it is common business practice for those applying for a mortgage to pay for items such as
credit reports and property appraisals before the loan is provided.
Almost half of those who said that they had paid money to obtain a promised credit card or loan said that they had actually received
the credit card or loan.

39

See, e.g., Peter J. Vander Nat and William W. Keep, “Marketing Fraud: An Approach for Differentiating Multilevel Marketing from
Pyramid Schemes,” Journal of Public Policy & Marketing, 21 (Spring 2002), pp. 139-151. In one of many such cases, the FTC sued a
promoter of a pyramid scheme in FTC v. BurnLounge, Inc., No. 07-03654 (C.D. Cal. filed June 2007).

13

Consumer Fraud in the United States

were then asked whether they had been led to believe that they would earn a certain amount of money
from the business, and if so, how much they had actually earned, relative to what had been promised
(Questions 35.1 and 35.2). As with business opportunities and work-at-home programs, those who had
been led to believe that they would earn a certain amount of money and had, in fact, earned less than
half of that amount are considered to be victims for purposes of this survey.40

Fraudulent Promises of Government Jobs
The survey also asked about a type of employment fraud in which the seller guarantees or represents
that it is highly likely that consumers will obtain a government job. Often, these offers promise jobs with
the U.S. Postal Service. The ads often look like “Help Wanted” ads, but in fact, they are not placed by
the government or anyone who can provide the promised jobs. Rather, they typically are offers to sell
a course or study guide that supposedly will improve the consumer’s score on a test that is allegedly
required to obtain the promised job. It is not clear that the materials offered can actually improve
consumers’ scores, and in any event the ads frequently are run in areas where the test will not even be
offered, because there are no job vacancies to be filled.41
To identify consumers who had been victims of this type of misrepresentation, survey participants were
asked “In the past year, have you paid anyone who promised that you would obtain a job at the U.S.
Postal Service or another branch of state or federal government?” Those who answered in the affirmative
were then asked “Did you get the job that was promised?” (Questions 32.1 and 38). Anyone who had not
received the promised job was considered a victim of this type of fraud.

Counterfeit Checks
As the name suggests, a counterfeit check scam involves the victim being sent a check that turns out
to be bogus. In the context of a prize promotion or a grant promotion, the perpetrator of the underlying
prize or grant fraud may send a check purportedly to cover the cost of a fee or payment that the victim is
told must be paid before receiving the required grant or fee.
In other contexts, the victim may be selling a product in which the perpetrator pretends to be interested,
and the counterfeit check is provided purportedly to cover the cost of the item being purchased. Instead
of just covering the fee or payment for the item being sold, the check that is sent is written for an
amount greater than the amount that was needed. This is frequently explained as being a mistake made
by an assistant who misunderstood the amount for which the check was supposed to be written. The
perpetrator then asks the consumer to cash the check and return the excess amount or send the excess to
a supposed third party, often using money transfers. The perpetrator’s hope is that the victim will wire
the excess money before he or she discovers that the check is bogus, and as a result, the victim will be
out the amount of money that was wired.
The survey sought to learn whether this kind of bogus check fraud was perpetrated in three separate
settings – in connection with a prize promotion, in connection with a grant, or in some other context. In
each case, those who had made a payment were asked whether they had received a check to cover a fee
40

Also consistent with the treatment of business opportunities and work-at-home programs, those who purchased a pyramid scheme but
did not work at it are counted as victims.

41

The FTC has filed complaints against a several promoters of such schemes. See, e.g., FTC v. Government Careers Inc., No. 09-721 (D.
Ariz. filed Dec. 2008); FTC v. Frontier Publishing, Inc., No. 11-01537 (C.D. Cal. filed Oct. 2011); FTC v. U.S. Work Alliance, Inc.,
No. 08-2053 (N.D. Ga. filed June 2009).

14

Survey Description

or the cost of an item and been asked to send some of the money back to the sender or to a third party,
and if so, whether they had actually sent the money as requested (Questions 39a.9, 41a.8, 42, and 42a).
Those who indicated that they had received a check and had made a payment were then asked whether
the check turned out to be valid so that they were able to obtain the promised money, whether it was
counterfeit, or whether they had never attempted to cash the check (Questions 39a.10, 41a.9, and 42e).
Those who found that the check was counterfeit or who did not attempt to cash the check are treated as
being victims of a counterfeit check fraud.

Grants
Another fraudulent offering that has appeared in recent years is the promise of free grants for which
prospective victims are told that they are qualified. Often the claim is that the government is making
these grants available and that the money can be used for most any purpose, for example, paying off
existing debt or remodeling a home. Sometimes the party making the offer states that consumers who
pay a required fee are guaranteed to receive a grant. In other cases, the claim is that the seller offers
services that will help consumers apply for the grant – which they are then certain to obtain. The
Commission has brought numerous cases alleging situations along these lines.42
To investigate the extent of this problem, the survey asked participants whether they had been told
that they “were eligible to receive a grant either from the government or from someone else or that
someone would help [them] prepare a proposal for a grant that was certain to be approved” (Question
41). Those who said that they had been told that they were certain to receive such a grant were asked
whether they had been told that they had to pay a fee to receive the grant or to have the grant proposal
prepared, and if so, if they had made such a payment (Questions 41a.1 and 41a.2). Finally, those who
had made payments were asked whether they had actually received the grant, and if so, whether it had
been essentially what had been described by the seller (Questions 41a.4 and 41a.5). Those who made a
payment and either did not receive the promised grant or who received a grant that was not essentially
what had been described were considered to be victims of this fraud.

2.3 More General Types of Fraud Included in the Survey
In addition to the 15 specific types of frauds described above, the survey also asked consumers whether
they had experienced two more general problems that may indicate fraud.

Billing Problems, Other Products
In addition to asking participants if they had been billed without their consent for the particular products
or services described above, the survey also asked more generally whether the participant had been
billed for “some other product or service” that they had not agreed to purchase (Question 22.1).

Paid But Not Received
The survey also sought information about consumers who paid for a product or service but never
received it. The Federal Trade Commission often receives complaints from consumers who report
that they purchased an item and paid for it, but the seller never provided it. To gauge the extent of this

42

See, e.g., FTC v. Real Wealth, Inc., et al., No. 10-60 (W.D. Mo. filed Jan. 2010); FTC v. Affiliate Strategies, Inc., No. 09-04104 (D.
Kan. filed July 2009); FTC v. In Deep Services, Inc., No. 09-01193 (C.D. Cal. filed June 2009); FTC v. Grant Connect, LLC, No. 0901349 (D. Nev. filed July 2009).

15

Consumer Fraud in the United States

problem, the survey asked participants: “Other than the things we have already discussed, in the past
year have you purchased something which you paid for but NEVER received?” (Question 45).43

43

As with problems of unauthorized billing, if consumers fail to receive a product for which they paid, this may indicate that the seller
was engaged in fraud. Alternatively, it may simply indicate a mistake made by an honest seller. As with the questions about billing,
an attempt was made to differentiate between the legitimate and illegitimate by asking about the seller’s willingness to provide a
refund or to make some other adjustment that was satisfactory to the purchaser (Questions 47 and 48). A willingness to make such an
adjustment may indicate that the seller is more likely to be legitimate and just made a mistake, whereas a seller who refuses to make
an adjustment or who makes it overly difficult for the consumer to obtain one is more likely to have fraudulent intentions.

16

Prevalence of Surveyed Categories of Fraud

3. Prevalence of Surveyed Categories of Fraud
Chapter 3 reports the basic results of the 2011 FTC Fraud Survey. What share of consumers were victims
of the frauds examined in the survey during 2011? How many incidents of these frauds occurred? Which
types of fraud were the most prevalent?

3.1 Overall Rates of Victimization and Number of Incidents
•• An estimated 10.8 percent of U.S. adults – those at least 18 years of age – were victims of one or
more of the frauds covered by this survey (“Any Surveyed Fraud”) during 2011.44 This implies
that 25.6 million U.S. adults were victims during 2011 (Table 2).45
•• Some victims experienced more than one incident of fraud during 2011, either because they were
victims of more than one type of fraud or because they were victims of the same type of fraud
multiple times. During 2011, there were an estimated 37.8 million incidents of
Any Surveyed Fraud (Table 3).
•• Of the estimated 25.6 million victims, 18.8 million were victims of one or more of the specific
frauds covered by the survey (“Any Specific Surveyed Fraud”), while 7.9 million experienced
one or both of the two more general frauds (“Any Surveyed More General Frauds”).46 Of the 37.8
million incidents, 28.8 million involved one of the specific frauds and 9.0 million involved the
more general frauds.

3.2 Specific Surveyed Frauds
Fraudulent Weight-Loss Products – The Most Victims of Any Surveyed Fraud
•• During 2011, more consumers were victims of fraudulent weight-loss products than of any of the
other specific frauds covered by the survey. An estimated 2.1 percent of consumers – a total of 5.1
million U.S. adults – purchased and used fraudulent weight-loss products (Table 2 and Figure 1).
44

Survey participants were asked about experiences they had had during the year before they were interviewed. Responses to these
questions will be characterized as involving events that occurred during 2011 even though there may be a few events that actually
occurred in late 2010 or in early 2012 since interviews were conducted between November 28, 2011, and February 5, 2012.
Throughout the report, the estimated number of victims of the various frauds and the number of incidents are projections from the
responses of those interviewed as part of the survey. The projections are based on the estimated U.S. population of 237.66 million
adults – 18 and older – as of July 1, 2011. (U.S. Census Bureau, Population Division, Annual Estimates of the Resident Population for
Selected Age Groups by Sex for the United States: April 1, 2010 to July 1, 2011 (NC-EST2011-02), released May 2012, available at
http://www.census.gov/popest/data/national/asrh/2011/index.html.)
If survey participants either over- or under-reported whether they had experienced any of the included frauds, the reported figures will
differ from the actual extent of the various frauds. In addition, if the experiences of those who agreed to participate in the survey differ
from that of those who declined to participate, the results reported here will differ from the actual extent of the various frauds. (See
Appendix C for an analysis of whether the experience of those who refused to participate in the survey differs from that of those who
did participate.)

45

The approach used in analyzing the number of victims and the number of incidents in this report is the same as was used in the
analysis of the previous surveys. For a description of this methodology see the “Methodological Appendix to Chapter 3” in the report
on the 2003 survey. (Anderson (2004), supra n.1, pp. 45-48.)

46

Because the same individual could have experienced both specific and general frauds, the sum of those experiencing specific frauds
and those experiencing general frauds exceeds the total number of victims. Similarly, the sum of the number of victims experiencing
each of the 17 types of fraud exceeds the total number of victims because some individuals experienced more than one type.

17

Consumer Fraud in the United States

Table 2. Estimated Number of Adults Who Were Victims of Fraud, 2011
Type of Fraud

Number of Victims
(millions)

Victims as Percent
of Adult Americans

Any Surveyed Fraud

25.6
(22.4 – 28.7)

10.8%
(9.4% - 12.1%)

Any Specific Surveyed Fraud

18.8
(16.0 – 21.5)

7.9%
(6.7% - 9.1%)

Weight-Loss Productsa

5.1
(3.6 – 6.6)

2.1%
(1.5% - 2.8%)

Prize Promotionsb

2.4
(1.5 – 3.3)

1.0%
(0.6% - 1.4%)

Unauthorized Billing – Buyers’ Clubs

1.9
(1.3 – 2.6)

0.8%
(0.5% - 1.1%)

Unauthorized Billing – Internet Services

1.9
(1.1 – 2.7)

0.8%
(0.5% - 1.1%)

Work-at-Home Programsc

1.8
(0.8 – 2.8)

0.7%
(0.3% - 1.2%)

Credit Repair

1.7
(0.8 – 2.7)

0.7%
(0.3% - 1.1%)

Debt Reliefd

1.5
(0.6 – 2.3)

0.6%
(0.3% - 1.0%)

Credit Card Insurance

1.3
(0.6 – 2.1)

0.6%
(0.3% - 0.9%)

Business Opportunitiese

1.1
(0.4 – 1.8)

0.5%
(0.2% - 0.8%)

Mortgage Relief

0.8
(0.2 – 1.4)

0.3%
(0.1% - 0.6%)

Advance Fee Loansf

0.7
(0.1 – 1.3)

0.3%
(0.0% - 0.6%)

Pyramid Schemesg

0.7
(0.2 -1.1)

0.3%
(0.1% - 0.5%)

Government Job Offers

0.5
(0.0 – 1.1)

0.2%
(0.0% - 0.5%)

Counterfeit Check Scams

0.4
(0.1 – 0.8)

0.2%
(0.0% - 0.3%)

Grant Scams

0.2
(0.0 – 0.5)

0.1%
(0.0% - 0.2%)

7.9
(6.1 – 9.6)

3.3%
(2.6% - 4.0%)

Paid for Something Never Received

4.5
(3.1 – 6.0)

1.9%
(1.3% - 2.5%)

Unauthorized Billing – Other Products

3.6
(2.6 – 4.6)

1.5%
(1.1% - 1.9%)

Any More General Surveyed Fraud

(Table 2 continues on next page)

18

Prevalence of Surveyed Categories of Fraud
Table 2 (continued)
Source: 2011 FTC Fraud Survey
Notes.
Numbers are rounded to the nearest 0.1 million and percentages to the nearest 0.1 percent. 0.0 denotes a value of less than 0.05
million. 0.0% denotes a value of less than 0.05 percent.
Amounts in individual categories will not sum to totals because some individuals are victims of more than one of the listed frauds.
Figures in parentheses are 95 percent confidence intervals.
Projections are based on estimated U.S. population of 237.66 million adults – 18 and older – as of July 1, 2011. (See U.S. Census Bureau,
Population Division, Annual Estimates of the Resident Population for Selected Age Groups by Sex for the United States: April 1, 2010 to
July 1, 2011 (NC-EST2011-02), released May 2012, available at http://www.census.gov/popest/data/national/asrh/2011/index.html.)
a. These figures do not include those who purchased a weight-loss product and then did not use it. If these people are included as
victims, there were an estimated 6.0 million victims – 2.5 percent of the adult population. If the definition of a victim is limited
to those who purchased and used a product that was promoted as allowing one to lose weight without diet and/or exercise – but
not products that only claimed that weight loss would be easy – there were only 4.0 million victims – 1.7 percent of the adult
population. (All of the estimates only include those who lost less than half of the weight anticipated.)
b. If those who did not receive a promised prize after attending a sales presentation are not included as victims, the estimated number
of victims would be 1.2 million – 0.5 percent of the adult population.
c. These figures include those who purchased a work-at-home program but then did not work at it. If these people are not counted as
victims, the estimated number of victims is 1.2 million – 0.5 percent of the adult population.
d. These figures do not include as victims anyone who was promised a reduction in the amount they owed and who received half or
more of the reduction they expected on the debt or debts that were settled. If such people are counted as victims, the estimated
number of victims remains at 1.5 million. Only one survey participant reported having had at least one debt settled and having
received at least half of the amount that had been promised.
e. These figures include those who purchased a business opportunity but then did not work at the offering. If these people are not
considered to be victims, there were 1.0 million victims – 0.4 percent of the adult population.
f.

These estimates assume that those who were required to pay an advance fee were not victims if they, in fact, received the promised
credit card or loan. If everyone who paid a fee is considered to be a victim, whether or not the credit card or loan was received, the
estimated number of victims would be 1.7 million – 0.7 percent of the adult population.

g. These figures include only those who purchased a membership in a pyramid scheme, were told that they would realize a promised
level of earnings, and then earned less than half of that promised amount. Consumers who purchased a membership in a pyramid
scheme but then did not work at the offering are considered to be victims. However, changing these assumptions either to count
everyone who purchased a pyramid scheme as a victim or counting only those who actually worked at the scheme and earned less
than half of the promised amount has only a negligible effect on the estimated number of victims.

19

Consumer Fraud in the United States

Table 3. Estimated Number of Incidents of Fraud, 2011
Type of Fraud

Number of
Incidents
(millions)

Incidents per
Hundred Adult
Americans

Incidents
per Victim

Any Surveyed Fraud

37.8
(32.1 – 43.5)

15.9
(13.5 – 18.3)

1.5

Any Specific Surveyed Fraud

28.8
(23.5 – 34.1)

12.1
(9.9 – 14.3)

1.5

Weight-Loss Productsa

7.6
(4.9 – 10.4)

3.2
(2.0 – 4.4)

1.5

Prize Promotionsb

2.9
(1.8 – 4.1)

1.2
(0.7 – 1.7)

1.2

Work-at-Home Programsc

2.8
(0.4 – 5.1)

1.2
(0.2 – 2.1)

1.6

Unauthorized Billing – Buyers’ Clubs

2.3
(1.4 – 3.2)

1.0
(0.6 – 1.3)

1.2

Unauthorized Billing – Internet Services

2.2
(1.3 – 3.2)

0.9
(0.5 – 1.4)

1.2

Credit Card Insurance

2.2
(0.5 – 3.9)

0.9
(0.2 – 1.7)

1.7

Credit Repair

2.0
(0.9 – 3.1)

0.8
(0.4 – 1.3)

1.2

Debt Reliefd

1.7
(0.7 – 2.7)

0.7
(0.3 – 1.1)

1.1

Business Opportunitiese

1.2
(0.5 – 2.0)

0.5
(0.2 – 0.8)

1.1

Advance Fee Loansf

0.9
(0.1 – 1.6)

0.4
(0.0 – 0.7)

1.2

Mortgage Relief

0.8
(0.2 – 1.4)

0.3
(0.1 – 0.6)

1.0

Pyramid Schemesg

0.7
(0.3 – 1.2)

0.3
(0.1 – 0.5)

1.1

Counterfeit Check Scams

0.6
(0.1 – 1.1)

0.2
(0.0 – 0.5)

1.3

Government Job Offers

0.6
(0.0 – 1.3)

0.2
(0.0 – 0.5)

1.2

Grant Scams

0.2
(0.0 – 0.5)

0.1
(0.0 – 0.2)

1.0

9.0
(7.0 – 11.0)

3.8
(3.0 – 4.6)

1.1

Paid for Something Never Received

4.8
(3.3 – 6.4)

2.0
(1.4 – 2.7)

1.1

Unauthorized Billing – Other Products

4.2
(2.9 – 5.4)

1.8
(1.2 – 2.3)

1.2

Any More General Surveyed Fraud

(Table 3 continues on next page)

20

Prevalence of Surveyed Categories of Fraud
Table 3 (continued)
Source: 2011 FTC Fraud Survey
Notes.
Values are rounded to the nearest 0.1 million. 0.0 denotes a value of less than 0.05 million.
Figures in parentheses are 95 percent confidence intervals.
Projections are based on estimated U.S. population of 237.66 million adults – 18 and older – as of July 1, 2011. (See U.S. Census Bureau,
Population Division, Annual Estimates of the Resident Population for Selected Age Groups by Sex for the United States: April 1, 2010 to
July 1, 2011 (NC-EST2011-02), released May 2012, available at http://www.census.gov/popest/data/national/asrh/2011/index.html.)
a. These figures do not include instances in which a consumer purchased a weight-loss product and then did not use it. If these
incidents are included, there were an estimated 9.8 million incidents of weight-loss fraud – 4.1 per hundred adult Americans. If only
those cases where a product was promoted as allowing one to lose weight without diet and/or exercise – but not products that only
claimed that weight loss would be easy – are included, there were only 5.6 million estimated incidents – 2.4 per hundred adults.
(All of the estimates only include those who lost less than half of the weight anticipated.)
b. If instances in which a person did not receive a promised prize after attending a sales presentation are not included, there were an
estimated 1.4 million incidents of prize promotion fraud – 0.6 per hundred adults.
c. These figures include instances in which consumers purchased a work-at-home program but then did not work at it. If these
incidents are not included, the estimated number of incidents is 1.8 million – 0.8 per hundred adults.
d. These figures do not include instances in which consumers were promised a reduction in the amount they owed and received
half or more of the reduction they expected on the debt or debts that were settled. If such incidents are included, the estimated
number of incidents of debt relief fraud remains at 1.7 million incidents. Only one survey participant reported having had at least
one debt settled and having received at least half of the amount that had been promised.
e. These figures include incidents in which consumers purchased a business opportunity but then did not work at it. Excluding those
who did not work at the business opportunity has only a negligible effect on the estimated number of incidents.
f.

These estimates do not include instances in which consumers were required to pay an advance fee, but received the promised
credit card or loan. If all incidents in which a fee was required prior to receipt of a credit card or loan are included, the estimated
number of incidents would be 2.6 million – 1.1 per hundred adults.

g. These figures include only those who purchased a membership in a pyramid scheme, were told that they would realize a promised
level of earnings, and then earned less than half of that promised amount. Consumers who purchased a membership in a pyramid
scheme but then did not work at the offering are considered to be victims. However, changing these assumptions either to count all
instances in which a pyramid was purchased or counting only those incidents where the consumer actually worked at the scheme
and earned less than half of the promised amount has only a negligible effect on the estimated number of incidents.

21

Consumer Fraud in the United States

Figure 1. Specific Surveyed Frauds, by Number of Victims
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Prevalence of Surveyed Categories of Fraud

These consumers purchased and used weight-loss products that they were told would enable them
to lose weight easily or to lose weight without diet or exercise. However, when they used the
product, they lost less than half of the weight they had expected to lose. There were a total of 7.6
million incidents of weight-loss fraud during 2011. On average, consumers who were victims of
weight-loss fraud purchased and used 1.5 such fraudulent weight-loss products during the year
(Table 3 and Figure 2).47
• Of those who purchased a weight-loss product that was supposed to make it easy to lose
weight or allow them to lose weight without diet or exercise, 13 percent reported that they
lost at least as much weight as they had expected to lose, while 8 percent reported losing
about half of the weight they expected to lose. Another 18 percent said that they lost only
a little of the weight they expected to lose, while 45 percent said that they had not lost any
weight, or had gained weight, while using the product. Fifteen percent said that they had not
used the product they had purchased.48

Fraudulent Prize Promotions
•• Fraudulent prize promotions were the second-most prevalent of the specific frauds covered by
the survey. These are situations in which a consumer paid something, purchased a product, or
attended a sales presentation in order to obtain a promised prize or award such as money or a
free vacation. However, after making the payment or purchase, or attending the required sales
presentation, the consumer either did not receive the prize or award, or it was not what had been
described. This type of fraud was experienced by 1.0 percent of survey participants during 2011,
representing 2.4 million U.S. adults (Table 2 and Figure 1). There were 2.9 million incidents of
this type of fraud during 2011, 1.2 incidents per 100 U.S. adults (Table 3 and Figure 2).
• Approximately 53 percent of those who reported being a victim of a fraudulent prize
promotion said that they had attended a sales presentation in order to obtain their prize. An
additional 33 percent said that they had made a payment, while 14 percent said that they had
been required to make a purchase.49
• If only those who made a payment or purchase in order to receive a promised prize – and
not those who attended a sales promotion – are counted as victims of fraudulent prize

47

People who purchased one or more of these weight-loss products but then indicated that they had not actually used the product are not
counted as victims in the figures reported above and in Tables 2 and 3. If such people are counted as victims, the estimated number of
victims of this type of fraud would be 6.0 million and the estimated number of incidents would be 9.8 million. Products that sellers
promoted as making it easy to lose weight, but where the seller did not claim that using the product would make it possible to lose
weight without diet or exercise, are considered to be frauds in the figures in the text and tables. If one only includes products that were
promoted as resulting in weight loss without diet or exercise, there were only 4.0 million victims and only 5.6 million incidents.

48

The distribution of responses here is not significantly different from the responses in the 2005 survey. (In order to perform the
statistical test here and in other cases where the analysis is of a subset of those who participated in the survey, it was sometimes
necessary to omit a few observations from the test. As described in the methodology report in Appendix B, 20 strata were used in
selecting telephone numbers to call as part of the survey. In examining responses to questions that were only asked of a subset of
survey participants, in some cases it turns out that there is only a single person in a particular stratum for which the question being
analyzed was relevant. Where this happens, it is not possible to calculate a standard error if those observations are included. It is
therefore necessary to delete such observations when performing the analysis. For example, in this case, it was necessary to delete 7
observations – 4 from the 2011 survey and 3 from the 2005 survey – because there was only one person in particular strata who had
purchased a weight loss product that was promoted as making it easy to lose weight or allowing one to lose weight without diet or
exercise, and who was, therefore, asked how much weight they lost using the product.)

49

The distribution of what victims of fraudulent prize promotions did to obtain the promised prize – attend a sales presentation, buy a
product, or make a payment – is essentially unchanged from what was found in the 2005 survey.

23

Consumer Fraud in the United States

Figure 2. Specific Surveyed Frauds, by Number of Incidents
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Source: Table 3.

24

Prevalence of Surveyed Categories of Fraud

promotions, there were an estimated 1.2 million victims of fraudulent prize promotions (0.5
percent of the U.S. adult population).

Unauthorized Billing for Buyers’ Club Memberships
•• Being billed for a membership in a buyers’ club that the consumer had not agreed to join was one
of two problems that tied as the third-most prevalent of the specific frauds reported by survey
participants. This problem was reported by 0.8 percent of survey participants, representing 1.9
million U.S. adults. There were an estimated 2.3 million incidents of this type of fraud, 1.0
incidents per hundred U.S. adults.50

Unauthorized Billing for Internet Services
•• Like receiving an unauthorized bill for a buyers’ club membership, 0.8 percent of survey
participants – representing an estimated 1.9 million adults – reported that, during 2011, they had
received an unauthorized bill for Internet services such as Internet access or website hosting or
development from a company with which the consumer had not previously done business. There
were an estimated 2.2 million incidents of this type of fraud.

Fraudulent Work-at-Home Programs
•• The purchase of a work-at-home program where the consumer failed to earn at least half of the
amount that they had been told they would earn was the fifth-most prevalent of the specific frauds
in the survey. During 2011, this fraud was experienced by 0.7 percent of survey participants,
representing an estimated 1.8 million U.S. adults.51
• Victims of work-at-home frauds were more likely to report having experienced multiple
incidents of this fraud than was the case for the more-prevalent frauds. On average, victims
of work-at-home fraud purchased 1.6 different fraudulent work-at-home programs during

50

Unauthorized billing for a membership in a buyers’ club is one of three frauds included in the survey that involved being billed for
a product or service that the consumer had not agreed to purchase or being billed for an amount that was substantially more than the
consumer had agreed to pay. The other two areas covered unauthorized billing for Internet services and unauthorized billing for a
product other than a buyers’ club or Internet services.
Because the estimates of the prevalence of unauthorized billing are based on the responses of consumers who were interviewed as
part of the survey, these estimates likely understate the extent of the problem of unauthorized billing. (The same problem exists with
the estimates derived from the earlier surveys.) Consumers can only tell an interviewer that they have received an unauthorized bill if
they noticed it. Consumers would not know that they had been victims of this type of fraud if unauthorized charges were placed, for
example, on their credit card or telephone bills but were not noticed and just paid.
Unauthorized billing frauds were also included in the earlier surveys and, as in the earlier surveys, when participants indicated that
they had experienced an unauthorized billing, they were asked whether they had sought a refund and whether the seller had been
willing to provide one. In order to avoid counting an incident where an honest mistake is made by a legitimate business as a fraud,
those who indicated that they had obtained a refund are not considered to be victims of fraud. (For a discussion of how those who had
not sought a refund are treated, see Anderson (2004), supra n.1, p. 12.)
Also consistent with the previous surveys, in order to be considered victims of an unauthorized billing fraud, consumers also had to
indicate that they had actually made a payment. Consumers who received an unauthorized bill but did not make a payment in response
to the bill were not considered to be victims.

51

Those who purchased a work-at-home program and then did not work at the program are included among the fraud victims in
estimating the number of victims of this type of fraud. In the FTC’s enforcement experience, some victims of fraudulent work-athome programs realize that the program will not work as soon as they receive the program materials. As a result, they do not try to use
the program. If people who did not work at the program they had purchased are not counted as victims, there were 1.2 million victims
of this type of fraud – 0.5 percent of the U.S. adult population – and 1.8 million incidents.

25

Consumer Fraud in the United States

2011.52 As a result, work-at-home fraud ranks third in terms of the number of incidents of
fraud during the year, with an estimated 2.8 million incidents.
• Of survey participants who bought work-at-home programs during 2011, 21 percent said that
they made no money, and may have lost money. An additional 17 percent said that they made
less than half of the money they had been told that they would make from the program, while
27 percent said that they had not worked at the program after buying it. These people are
considered to have been victims of fraudulent work-at-home programs.
• The remaining 35 percent of work-at-home program purchasers were not considered to be
victims of fraud. About six percent of purchasers indicated that they had made as much or
more than they had expected to make, while another five percent indicated that they had
made at least half as much as they had expected. In approximately 25 percent of cases,
purchasers indicated that the seller of the program had not represented that they would earn a
particular level of income.53

3.3 More General Surveyed Frauds
•• One of the general frauds covered by the survey – paying for a product but never receiving it –
was reported by more survey participants than any other fraud in the survey with the exception
of the purchase of fraudulent weight-loss products. During 2011, this fraud was experienced by
1.9 percent of survey participants. This represents an estimated total of 4.5 million adults (Table
2). There were an estimated 4.8 million incidents of this type of problem during the year, 2.0
incidents per 100 adult Americans (Table 3).
• More than half of those who were victims of this type of fraud – 57 percent – ordered the
product or service that they did not receive from an Internet website, while 23 percent said
that they used the telephone to order the product or service. Only 4 percent of victims of this
type of fraud purchased the product by mailing in an order.54
• Just over 50 percent of those who were victims of this type of fraud reported that they first
learned about the product or service on the Internet, with 10 percent reporting that they had
learned about the product or service from an Internet auction site and 29 percent reporting
that it was a standard Internet website. None of the victims of this type of fraud reported that
they had first learned about the product from an online classified ad site. (The remaining 11
percent reported that they had learned about the product from an Internet site, but did not
answer a follow-up question that asked whether that was an Internet auction site, an online
classified ad site, or another Internet website.)55
• Survey participants reported this type of problem involving a wide range of products
including telephone services or equipment, particularly cell phone services and equipment,
books and magazines, and health care products and services.
52

This compares to 1.5 incidents per victim for fraudulent weight-loss products and 1.2 for prize promotions and the two unauthorized
billing frauds.

53

The distribution of responses concerning whether an earnings representation was made, and if so, how much the purchaser earned
relative to what they had been told to expect is not significantly different from that in the 2005 survey.

54

In 2005, 20 percent of the orders for products that were never received were mail orders.

55

The percentage of victims of this type of fraud who first learned of the product or service from Internet auction websites or from
general Internet sites is not significantly different from the results of the 2005 survey.

26

Prevalence of Surveyed Categories of Fraud

•• An estimated 1.5 percent of those surveyed – representing 3.6 million people – reported that they
had been billed without authorization for a product or service, other than Internet service or a
buyers’ club membership, during 2011 (Table 2). There were an estimated 4.2 million incidents of
this type of fraud (Table 3).
• Unauthorized billing was reported involving a range of products and services including
health care products and services, books and magazines, and CDs, video tapes, and DVDs.

3.4 Incidents of Fraud by

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A8b4d8fe79f877458. Public record. Not legal advice.